Retirement Plan Basics for Divorcing Or Separating Couples

There are two basic types of retirement plans. Those that are defined by the benefits paid, and those that are defined by the contributions made. Retirement plans that are defined by the benefits paid are are referred to as “Defined Benefits” plans. Defined benefits plans are what most people think of as pensions. Those plans tell you how much you will receive, usually on a monthly basis, when you retire. The amount is usually based on your earnings and the amount of time spent in the pension system. Many public employees have this type of retirement plan.

A plan defined by its contribution, sets the amount by the amount that you have contributed into the plan, often with matching contributions from the employer. Those types of plans are referred to as “Defined Contribution” plans. Periodically, the trustee issues a statement showing how much is in the plan. Examples of this type of plan are IRA, 401K, ESOP, Profit Sharing, Tax Deferred Annuities.

The value of a Defined Contribution plan is easy to determine: The balance is shown on the statement similar to a bank account. The value of a Defined contribution plan is more difficult to determine, and if the administrator of the plan cannot provide a value, it may be necessary to hire an accountant or other financial professional to do the computation. Dividing retirement plans require court orders (Qualified Domestic Relations Orders, known as QDROs). They are very technical in nature and require special expertise.

Retirement is the most complex and difficult area of Divorce Law. . Mistakes may not be discovered until many years after the divorce. Many divorce lawyers and mediators do not have the knowledge to handle retirement benefits, and they bring in experts who specialize in that area to deal with that part of the case.. You should ask your attorney what he or she knows about QDROs. and how he or she expects to handle it. An attorney who downplays the difficulties should make you uncomfortable, and lead you to ask exactly how much experience he or she has dealing with retirement plans and preparing QDR.

Be Well,

Mike Stokamer,

Separation & Divorce Mediator & Collaborative Attorney

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